Reports suggest OpenAI may purchase AI chips from Google, potentially impacting Nvidia’s market dominance. However, Nvidia’s stock remains largely unfazed, as the company is currently struggling with supply constraints to meet overwhelming demand. Significant existing commitments between OpenAI and Nvidia further complicate the narrative, suggesting a complex relationship beyond simple chip procurement.
Rumors are swirling that OpenAI, a leader in artificial intelligence development, is reportedly planning to acquire artificial intelligence (AI) chips from Google. The Information first broke the story on Tuesday, October 27th, citing an anonymous source familiar with the matter. Reuters further reported on the news, noting that no specific financial details or further information were disclosed. OpenAI itself has declined to comment on the speculation.
This potential move could be perceived as negative news for Nvidia ((NVDA-1.18%)), a company that has heavily benefited from OpenAI's significant demand for its graphics processing units (GPUs). Google, under its parent company Alphabet ((GOOGL+1.34%)(GOOG+1.60%)), is known for its own advanced AI hardware, the Tensor Processing Units (TPUs).
Despite the potentially significant implications, Nvidia's stock showed minimal reaction to the news. Shares traded little changed on Wednesday morning, hovering around $218. This comes after a recent dip, with the stock already down approximately 9% from its October 6th record high of $239.24.
Image source: Nvidia.
A Plan, Not Necessarily a Purchase Order
This isn't the first time OpenAI has engaged with Google's AI hardware. Reports from June 2025 indicated that OpenAI had been testing Google's TPUs. However, at that time, OpenAI clarified that it was in early testing phases and had no immediate plans for large-scale deployment. The current report suggests a shift towards ownership, with OpenAI reportedly intending to buy the chips, a move made possible by Google's recent decision to sell TPUs directly to select customers.
Crucially, the report, as relayed by Reuters, does not suggest that OpenAI is reducing its reliance on Nvidia. In fact, OpenAI's commitments to Nvidia remain substantial. In August, Nvidia announced that OpenAI's current and projected future commitments amount to approximately 12 gigawatts of computing power, with a potential increase to 16 gigawatts, representing an opportunity estimated at around $600 billion through 2030. Furthermore, Nvidia recently entered into agreements with OpenAI, capped at $105 billion, to cover lease and power expenses for a data center campus in Ohio that will exclusively house Nvidia's AI hardware, with only minor exceptions.
Such significant ongoing commitments to Nvidia appear incongruous with a customer planning a major pivot away from its offerings.
Assessing OpenAI's Impact on Nvidia's Revenue
Nvidia has not publicly quantified OpenAI's contribution to its revenue. However, in its latest quarterly filing (fiscal 2027 second quarter, ending July 26, 2026), the company disclosed that one significant unnamed customer, identified as an "AI research and deployment company," accounted for a "meaningful amount" of its revenue through the purchase of cloud services from Nvidia's clients.
While the potential $600 billion opportunity through 2030 is substantial, even for a company that reported $96.2 billion in revenue in its fiscal second quarter (a 106% year-over-year increase), the current report lacks concrete details about any shift in OpenAI's chip procurement strategy. The primary concern for Nvidia remains its ability to meet existing demand.
The Unrelenting Demand for Nvidia's Chips
During Nvidia's August earnings call, CFO Colette Kress projected revenue growth of approximately 70% for fiscal year 2028 (ending January 2028), citing supply constraints. She further noted that customer forecasts suggest Nvidia's growth could double in the upcoming year, but demand significantly outstrips available supply. CEO Jensen Huang echoed this sentiment, stating that Nvidia's current supply chain can only support about 70% growth, while actual demand is considerably higher.
This intense demand is reflected in Nvidia's surging commitments to its suppliers, which increased to $279 billion by the end of fiscal Q2, a sharp rise from $119 billion just three months prior and $95.2 billion in late January. The majority of this increase is attributed to memory purchases, indicating Nvidia's aggressive efforts to secure resources to meet future demand. This rapid escalation suggests Nvidia anticipates demand far exceeding its current production capacity.
In a market characterized by such scarcity, any chips that OpenAI might choose not to purchase from Nvidia would likely be readily absorbed by other eager customers. While increased competition from alternatives like Google's TPUs, potentially offered through cloud providers like Oracle starting in 2027, could eventually impact Nvidia's pricing power, Kress indicated that supply chain bottlenecks are expected to persist at least through the end of fiscal 2028.
Market capMarket cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.$5.19T
With Nvidia's stock trading around $218, investors are currently valuing the company at approximately 14 times its projected fiscal 2028 earnings, according to analyst consensus. This valuation stands in contrast to Alphabet's shares, which trade at roughly 21 times their anticipated 2027 earnings. The relative discount in Nvidia's valuation may indicate that the market is already factoring in a significant slowdown in its growth trajectory and an increase in market share for its competitors.
In conclusion, while the news of OpenAI's potential acquisition of Google's AI chips is noteworthy, it may not warrant an immediate sell-off of Nvidia stock. The true impact hinges on whether Nvidia can meet the overwhelming demand for its products. Management's projections suggest that supply constraints are likely to persist well into fiscal 2028, meaning chips that OpenAI might divert to Google's TPUs could easily find other buyers in the interim.
Given the lack of concrete terms and the ongoing supply-demand imbalance, selling Nvidia stock based solely on this unconfirmed report appears premature.
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